Oil major BP is directing investment in advanced biofuels to the United States and South America due to uncertainty about the European Union's future regulatory environment, a senior executive said.
“At the moment we are not contemplating investing in
second-generation cellulosic (ethanol) in Europe simply for the
reason that there is not enough certainty on what the market
conditions will be like,” Phil New, head of BP Biofuels, said in
an interview.
The European Union initially embraced biofuels, setting a
target that 10 percent of all fuels used in transportation
should come from renewable sources by 2020.
Support has wavered, however, as questions have been raised
about the environmental credentials of some biofuels.
Some critics have argued, for example, that the additional
crops needed to produce the fuels can lead to the destruction of
forests, which would release large quantities of greenhouse
gases into the atmosphere and exacerbate climate change.
The debate has created considerable uncertainty about future
regulation in the EU and stalled investment not only in biofuels
made from food crops, known as first generation, but also in
advanced or cellulosic biofuels, which are made from the
inedible parts of plants and do not compete with food crops.
“There are other places in the world that appear to be more
attractive places to invest,” New said, noting BP was developing
its technology predominately in the United States and was
looking at several options on where to invest, including Brazil.
THE SUGAR BAGASSE ADVANTAGE
BP is the owner-operator of several sugar cane ethanol mills
in Brazil, where it may develop cellulosic projects.
“I think what we are becoming increasingly interested in is
the integration potential between a sugar cane mill and a
cellulosic plant,” New said.
One of the biggest problems for cellulosic biofuel plants
has been the cost of transporting feedstock to the facility, but
with a sugar cane mill it is already on site.
“We have mountains of bagasse (the fibrous matter left after
sugar cane has been crushed). The choice at the moment is, ‘Do I
burn the bagasse and export electrons to the (power) grid or use
it as a feedstock for cellulosic ethanol?'” New said.
New said all of BP’s mills in Brazil had the ability to
alter their mix of sugar and ethanol output to a maximum of
around 60 percent directed to the product with higher value,
which varies according to market conditions.
Raw sugar futures have fallen to the lowest levels in almost
three years this month, prompting expectations that mills will
maximise production of ethanol, but New said the weakness of
Brazil’s real had changed the outlook.
Most sugar produced is exported and benefits from a weaker
real, while the bulk of ethanol is consumed domestically.
“It may not be as overwhelming a switch to ethanol as was
originally seen, simply because the weakening of the real has
offset some of the impact of the lower sugar price,” New said.
He added that in principle a weaker real should open up more
export markets for ethanol either to Japan, Europe or the United
States.
BP has also invested in a major biorefienry in Britain
through its partial ownership of Vivergo. The plant uses wheat
as a feedstock and is in the process of ramping up ahead of its
official opening later this year.
Britain, however, looks set to harvest its smallest wheat
crop in more than a decade this summer and should be a net
importer in 2013/14.
“It’s a worry. It would be nice if we hadn’t had this awful
winter,” New said, adding the firm’s preference was always to
use British wheat.
The site includes port access if imports are needed.
“We have got options,” New said.
Biorefineries can sometimes be converted to use other grains
or even a mix of grains if a feed source becomes scarce or there
are quality concerns. Last year UK biofuels producer Ensus used
a blend of wheat and maize following a poor quality harvest.
